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8 Winners and 5 Losers in the GOP Tax Bill

iStockphoto/The Fiscal Times

By Michael Rainey

December 18, 2017

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Although the Republican tax bill will likely pass this week, it will take months for experts to wade through the 503-page document to fully understand the implications of the many breaks and loopholes buried in the legislation. Here are some of the clear winners and losers so far:

8 Winners

1. Big business: Slashing the top corporate tax from 35 percent to 21 percent is a clear win for U.S. businesses, especially those who currently pay higher rates, like big retailers. The bill also eliminates the corporate alternative minimum tax, making it possible for some businesses to lower their rate below 21 percent through the use of various deductions. And multinationals with billions of dollars in profits offshore will be forced to bring that money home, but at rates ranging from 8 percent to 15.5 percent.

2. Real estate investors: Property owners already receive considerable benefits from the tax code, and a last-minute tweak added to the tax bill sweetens the pot, allowing landlords — including such notable figures as President Trump and Sen. Bob Corker — to take advantage of new tax breaks for pass-through businesses.

3. Pass-throughs: Most businesses in the U.S. are organized as pass-through entities, and the tax bill gives most of them a big break — a 20 percent deduction straight off the top line.Most ofthe benefit will flow to high-income households.

4. Individual taxpayers — until 2026: The majority of taxpayers will get a tax cut starting next year, though for many the size of the cuts will be modest. Although the alternative minimum tax remains in place, it now kicks in at a significantly higher level, shielding more upper-middle income households.

5. Wealthy heirs: The cutoff for paying estate taxes will be doubled to roughly $11 million for individuals and $22 million for couples, further reducing the number of estates exposed to the tax.

6. Wall Street: During the 2016 presidential campaign, Trump frequently complained about the rules for carried interest that allow some large investors to pay a lower tax rate. Those rules remain in place for the most part, much to the relief of many fund managers.

7. Tax planners: Republicans have talked about simplifying the tax code, but the Tax Cuts and Jobs Act is anything but simple. NYU tax expert Dan Shaviro predicts “there will be many billions of dollars” in transactions designed to reduce tax liability in the near future, meaning lots of billable hours for tax experts.

8. Supply-side conservatives: “This, if it passes, will be the single biggest policy triumph for conservatives since the 1996 welfare reform,” supply-side economist Stephen Moore told Politico. Long-time supply-sider Grover Norquist added that he thinks there’s more coming: “This tax cut and reform will drive further reforms and reductions for the next 50 years.” But will supply-siders still be crowing in five years?

5 Losers

1. Most individual taxpayers after 2025: The corporate tax cuts are permanent but many of the individual cuts expire after 2025. The majority of households will see higher taxes after that date, assuming Congress doesn’t step in to maintain the cuts.

2. Top earners in high-tax states: The tax bill imposes new limits on deductions for state and local taxes ($10,000) and mortgage interest ($750,000 on new purchases). Many high-income households in New York, California and other high-tax states will feel the pinch.

3. Workers on payroll: The tax bill gives a larger tax break to owners of businesses than to their employees, even if they do the same kind of work for the same pay.

4. Doctors and lawyers: Some high-income pass-through businesses, including many law firms and medical practices, will be unable to take advantage of new tax breaks for pass-through income.

5. Deficit hawks: It’s not clear that there are many deficit hawks left in the Republican Party, but anyone concerned about the size of the national debt can’t be happy with a bill that adds more than $1 trillion — and potentially as much as $2.2 trillion — to it.